China's New Contraceptive Tax: A Symbolic Move in the Battle to Boost Births

In a significant policy reversal, China is set to impose a value-added tax (VAT) on condoms and other contraceptives for the first time since 1993. Effective January 1st, these products will be subject to a 13% tax rate, marking the end of a long-standing exemption. This measure is a clear component of the government's multifaceted strategy to address a deepening demographic crisis, moving beyond financial incentives to include symbolic disincentives for family planning. This article examines the rationale behind the tax hike, its context within China's broader population policies, and the likely limited impact of this largely symbolic gesture.

The End of a Tax Exemption

The new 13% VAT on contraceptives was buried within a comprehensive VAT law passed in 2024, part of China's effort to modernize its tax regime by codifying administrative regulations into formal law. Value-added tax is a critical revenue stream, accounting for nearly 40% of China's total tax intake. The exemption for contraceptives had been in place since the nationwide VAT system was introduced in 1993, aligning with the era of the one-child policy. As noted in the legislative update, the removal of this exemption signifies a formal policy shift: where the state once promoted contraception, it now seeks to discourage its use to encourage higher birth rates.

Context: China's Carrot-and-Stick Population Strategy

For over a decade, China has been aggressively trying to reverse the consequences of its former one-child policy, which has led to a rapidly ageing population and a shrinking workforce. The government's approach has been described as 'carrot-and-stick'.

The 'carrots' include raising the child limit to three per couple, experimenting with provincial cash subsidies for additional children, offering discounts on IVF treatments, and providing extra paid leave for newlyweds. In 2025, the government allocated 90 billion yuan (approximately $12.7 billion) for a nationwide childcare subsidy program and announced plans to expand national healthcare insurance to cover all childbirth-related expenses.

Despite these incentives, results have been modest. The birth rate saw a slight increase to 6.77 per 1,000 people in 2024 but remains far below historical levels. With a rising death rate, China's population has been shrinking for at least three consecutive years. This persistent decline has led observers to suggest authorities are now deploying 'sticks'—policies that make not having children less convenient or more costly.

Symbolism Over Substance

Analysts agree the new tax is more about sending a message than generating revenue or significantly altering behavior. A typical packet of condoms costs 40-60 yuan ($5.70-$8.50). The 13% tax adds a negligible amount—roughly 5 to 8 yuan—to the final price. Independent demographer He Yafu stated, "Now that China’s birth policy has shifted to encouraging births and no longer promotes contraception, it is reasonable to resume taxing contraceptives. However, this measure is unlikely to have a significant effect on increasing the fertility rate."

Financial estimates support this view. Lee Ding, a manager at professional services firm Dezan Shira & Associates, estimates the tax will bring in only about 5 billion yuan annually—a "drop in the ocean" compared to China's general public budget revenue of 22 trillion yuan. "We do not believe revenue generation is the primary motivation," Ding concluded.

Public Reaction and Broader Concerns

The announcement has been met with ridicule and concern on Chinese social media. One Weibo user commented, "What is wrong with modern society? They are truly going to extreme lengths just to make us have children." The tax hike has amplified existing anxieties about increasing state intrusion into private life. There have been reports from some areas of local government officials contacting women to ask about menstrual cycles and childbearing plans. In one Yunnan county, women were required to report the date of their last period to authorities, a move the local health bureau defended as necessary to identify pregnant women.

This surveillance has sparked fears of more coercive measures. A social media user warned, "Today they require all women to report the time of their period, tomorrow it will be reporting the time of sexual intercourse, the day after tomorrow they’ll be calling to urge intercourse during the ovulation period … [this is] mass breeding."

Experts also warn of potential negative consequences, particularly for disadvantaged women. Yun Zhou, an assistant professor of sociology at the University of Michigan, noted that while the tax itself is unlikely to affect decision-making, it signifies "what desirable family behavior should be." She added that if access to contraception becomes more difficult, "the brunt of the negative effects will be borne by women, particularly by disadvantaged women."

Conclusion: A Policy of Signalling

China's decision to tax contraceptives after 30 years is a potent symbol of its desperate struggle against demographic decline. It represents a shift from passive permission to have more children to active, if subtle, discouragement of not having them. While the direct financial impact on consumers and the revenue benefit for the state are minimal, the policy communicates a clear normative message about family planning priorities. As the suite of carrots—cash subsidies, extended leave, healthcare coverage—fails to produce a sustained baby boom, the government appears willing to experiment with symbolic sticks. The true test will be whether such signals, combined with deeper societal pressures, can ultimately shift the calculations of young couples in a country facing profound demographic headwinds.